The Hedonists' Reckoning

[Demeter]

http://www.ft.com/cms/s/0/edece056-a776-11dd-865e-000077b07658.html

Published: October 31 2008 18:14 | Last updated: October 31 2008 18:14

We are in for a time of austerity. Are we ready for it? The US Department of Commerce has just released its advance third-quarter gross domestic product figures. They do not look good. The economy contracted over the past three months, due to the deepest fall in consumer spending since the Carter administration. Disposable income fell 8.7 per cent. This is an international downturn. Shop sales in the UK fell for the sixth month in a row in September, according to the British Retail Consortium. The European Commission announced that consumer confidence in the eurozone was the lowest in 15 years.

We should worry less about the bigness of our problems than about the smallness of our character. We are out of practice at handling a world of repossessed cars, hand-me-down clothes and cancelled vacations and graduation parties. For many decades, people were steeled against recession by a knowledge that things could be a lot worse. Britain had memories of postwar rationing. In the US, 8m people were unemployed throughout the 1930s. Even people in their mid-40s may remember Edward Heath’s three-day week and Jimmy Carter’s “malaise” speech.

Most people, though, are too young to remember that stuff. Perhaps that is why we are in the mess we are in. The US has not had a deep nationwide recession since at least 1981-82. The present consumer pessimism has not been equalled since December 1974, just after the Nixon resignation, when the US was still reeling from the oil embargo and President Ford was exhorting citizens to wear buttons that said “whip inflation now”. The youngest Americans who can remember the difficulty of paying for their children’s college education under such circumstances are approaching 70.

The US is not the same country it was the last time people had to tighten their belts. It has changed socially, economically and demographically. The range of problems has widened and the range of solutions has narrowed. Back in the 1970s, there were relatively few people with credit cards and hardly any who were “maxed out” on half a dozen. But the US now has $2,600bn (€2,000bn, £1,600bn) in outstanding non-mortgage debt, and The New York Times recently reported that 5.5 per cent of outstanding credit card debt had been written off by card issuers as losses. Indications are that the credit card problem in Britain is considerably worse....